A couple of weeks ago, I attended the SAP Commodity Management Forum in Heidelberg, Germany with around 70 other attendees. I was keen to get an update on SAP’s Commodity Management solution and I wasn’t disappointed. The thing about SAP that is different to any other vendor in the area, is its sheer size and its ability to push forward in any number of initiatives. The latest SAP strategic imperative, according to Anja Strothkaemper, VP Commodity Management and Agribusiness, is the Intelligent Enterprise. This vision has already delivered SAP Leonardo which delivers next generation technologies like machine learning, block chain, IOT capabilities, big data and analytics. According to SAP’s website, SAP Leonardo is a holistic digital innovation system that seamlessly integrates future-facing technologies and capabilities into the SAP Cloud Platform. Additionally, SAP has spent the last period migrating SAP Commodity Management to its SAP S/4HANA suite where it can be delivered in the cloud and where all of SAP’s latest tools, innovations and technologies can be utilized.
Theoretically, this all sounds good and so I was intrigued by a demonstration in which SAP was used to trade grain barges on the Mississippi river. While travelling down the Mississippi, a barge can change ownership many times requiring visibility into supply and change of ownership. The demo followed the business process from trade to settlement via an intuitive graphical user interface showing how a change in ownership was also captured in a blockchain. The demo was well crafted as it showed how things like collaboration, new technologies and the SAP applications could be used in a real-world scenario. This is where perhaps SAP has the edge on its competitors – the multi-faceted technological capabilities from across the company being focused to solve a commodity management problem.
Boasting over 130 licensed customers, SAP has to be now considered one of the top 5 in CM/CTRM but the last time I had seen the solution it was lacking in certain key ‘CTRM” areas such as book structure, trade capture for physical deals and position management of those deals. These are all being addressed quite rapidly, albeit often in collaboration with specific customers. Nonetheless, the deal capture demonstration showed just how far SAP has been able to get in achieving a more CTRM-like footprint. The screens are well designed, uncluttered and functional. Use of templates allows for work reduction by setting up screens where only three or four keystrokes are required to capture a deal, book structure is largely now catered for and audit trails of changes, approvals and so on are all there too. Currently, the simplified deal capture functionality is available as an add on and is focused on liquid hydrocarbons but it is easy to see how other commodities outside of electric power could be catered for very easily.
On the risk management side, a lot of effort has been put into delivering comprehensive near real time risk reporting. Mark to market and P&L – position reporting all ticked boxes and again, delivered using SAP toolsets that offer a range of additional flexibility, visualization and configuration. Where it still falls short is perhaps in the commodity-specific risk management tools around stress testing and so on and here, it is partnering with a supplier in the space anyway. SAP HANA is also intriguing. SAP now has its own database in SAP HANA, an in-memory data platform that supports the kind of next generation technologies delivered in SAP Leonardo. This provides a platform on which to develop the comprehensive risk analytics and near real-time performance that we saw demonstrated in Heidelberg. SAP S/4HANA goes further in delivering things like a conversational UI (think SIRI), process automation and next generation business processes.
All in all, it is difficult not see SAP gaining ground in the Commodity Management and even CTRM space. There are a few issues however. SAP still has functional gaps which it is working to address in its forward plan – though these gaps are generically considerably smaller than a couple of years ago. More importantly, it is focused on ags & softs primarily along with metals and oil & Gas. It is making strides in the liquid hydrocarbons side too especially in the deal capture area but electric power is unaddressed and may remain so. It is also primarily a high-end solution from a sole provider – which some will see as a benefit and others will not. It comes with a requirement for knowledge and expertise in the SAP platform and technology – something that is widespread in the market of course but may also come at a premium price. Taking advantage of all of SAPs technology may also be too expensive for many commodity players. On the other hand, current SAP users for accounting and ERP may find it the perfect solution although I suspect SAP is hoping to sell to non-SAP accounts too. My take, is that SAP has emerged as a tough competitor in the top- and top middle tier of the market and will continue to show momentum for the foreseeable future.